Interest / late penalties on invoices

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Interest / late penalties on invoices

Macho Philipovich-2
 Hi there,

How do you (or would you) handle interest or late charges on invoices
that go unpaid beyond the agreed time, say on a monthly basis, when this
was part of the initial agreement with the client?

Would you unpost your initial invoice, add the interest charges, then
repost and reprint it? Do the dates included need to change, in this
case? What if other new billable items have accrued in the intervening time?

Or is it better to somehow cancel the existing invoice and create a new
one, presumably with its own new invoice number?

Or is there some other, better way altogether of doing this? Issuing an
additional invoice that only contains the interest charge seems absurd,
but maybe there's another option I'm neglecting.

I couldn't find this addressed in the manual or anywhere else, so thanks
for any guidance you can provide!

Macho



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Re: Interest / late penalties on invoices

DaveC49
Macho,

From an accounting perspective, the interest charge is not incurred until the original invoice is overdue past the agreed date and should be recorded as such at that time, while the original sale is recorded at the date at which it occurred.

On this basis, I think it would be most appropriate to issue an additional invoice for the interest charges referencing the original invoice at the date those charges become applicable and then forward a copy of the original invoice along with the invoice for the interest charges to the customer. If the invoice remains outstanding, then you would have to periodically e.g monthly or quarterly send  new invoices for the accruing interest charges.

In mananging this for low value sales, the additional cost of issuing and mailing the additional invoice may outweigh any additional gain from the interest charge, so it may be wise to have a threshold in the sale value, above which you change the terms of sale to include the interest charge for late payment, or more simply, not pursue the interest charges for sales below an appropriate threshold while keeping the provision in the terms of sale.

You may also need to consider any constraints on policy imposed by any consumer protection legislation which may apply.

It would be interesting to compare the effectiveness of offering a discount for early payment with the imposition of an penalty interest  (or using both) in encouraging prompt payment of invoices. Carrot or stick cf carrrot then stick?


David Cousens
David Cousens
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Re: Interest / late penalties on invoices

Macho Philipovich-2
Thanks David.

Since the goal is to make it as convenient as possible for clients to
pay, I'd really like to present them with a simple document that clearly
indicates the total outstanding amount owing, rather than a series of
invoices they have to try to sum up.

Perhaps the solution is to send all the invoices with a cover sheet
listing the total, but that also seems unnecessarily complicated.

If anyone has any further thoughts I'd be happy to hear them.

Thanks,

Macho


On 2017-08-04 09:56 PM, DaveC49 wrote:

> Macho,
>
> From an accounting perspective, the interest charge is not incurred until
> the original invoice is overdue past the agreed date and should be recorded
> as such at that time, while the original sale is recorded at the date at
> which it occurred.
>
> On this basis, I think it would be most appropriate to issue an additional
> invoice for the interest charges referencing the original invoice at the
> date those charges become applicable and then forward a copy of the original
> invoice along with the invoice for the interest charges to the customer. If
> the invoice remains outstanding, then you would have to periodically e.g
> monthly or quarterly send  new invoices for the accruing interest charges.
>
> In mananging this for low value sales, the additional cost of issuing and
> mailing the additional invoice may outweigh any additional gain from the
> interest charge, so it may be wise to have a threshold in the sale value,
> above which you change the terms of sale to include the interest charge for
> late payment, or more simply, not pursue the interest charges for sales
> below an appropriate threshold while keeping the provision in the terms of
> sale.
>
> You may also need to consider any constraints on policy imposed by any
> consumer protection legislation which may apply.
>
> It would be interesting to compare the effectiveness of offering a discount
> for early payment with the imposition of an penalty interest  (or using
> both) in encouraging prompt payment of invoices. Carrot or stick cf carrrot
> then stick?
>
>
> David Cousens
>
>
>
> -----
> David Cousens
> --
> View this message in context: http://gnucash.1415818.n4.nabble.com/Interest-late-penalties-on-invoices-tp4693055p4693057.html
> Sent from the GnuCash - User mailing list archive at Nabble.com.
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.


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Re: Interest / late penalties on invoices

Derek Atkins-3
Send them a Customer Report
That's what it's for.

-derek
Sent using my mobile device. Please excuse any typos.



On August 5, 2017 6:03:53 PM Macho Philipovich <[hidden email]> wrote:

> Thanks David.
>
> Since the goal is to make it as convenient as possible for clients to
> pay, I'd really like to present them with a simple document that clearly
> indicates the total outstanding amount owing, rather than a series of
> invoices they have to try to sum up.
>
> Perhaps the solution is to send all the invoices with a cover sheet
> listing the total, but that also seems unnecessarily complicated.
>
> If anyone has any further thoughts I'd be happy to hear them.
>
> Thanks,
>
> Macho
>
>
> On 2017-08-04 09:56 PM, DaveC49 wrote:
>> Macho,
>>
>> From an accounting perspective, the interest charge is not incurred until
>> the original invoice is overdue past the agreed date and should be recorded
>> as such at that time, while the original sale is recorded at the date at
>> which it occurred.
>>
>> On this basis, I think it would be most appropriate to issue an additional
>> invoice for the interest charges referencing the original invoice at the
>> date those charges become applicable and then forward a copy of the original
>> invoice along with the invoice for the interest charges to the customer. If
>> the invoice remains outstanding, then you would have to periodically e.g
>> monthly or quarterly send  new invoices for the accruing interest charges.
>>
>> In mananging this for low value sales, the additional cost of issuing and
>> mailing the additional invoice may outweigh any additional gain from the
>> interest charge, so it may be wise to have a threshold in the sale value,
>> above which you change the terms of sale to include the interest charge for
>> late payment, or more simply, not pursue the interest charges for sales
>> below an appropriate threshold while keeping the provision in the terms of
>> sale.
>>
>> You may also need to consider any constraints on policy imposed by any
>> consumer protection legislation which may apply.
>>
>> It would be interesting to compare the effectiveness of offering a discount
>> for early payment with the imposition of an penalty interest  (or using
>> both) in encouraging prompt payment of invoices. Carrot or stick cf carrrot
>> then stick?
>>
>>
>> David Cousens
>>
>>
>>
>> -----
>> David Cousens
>> --
>> View this message in context:
>> http://gnucash.1415818.n4.nabble.com/Interest-late-penalties-on-invoices-tp4693055p4693057.html
>> Sent from the GnuCash - User mailing list archive at Nabble.com.
>> _______________________________________________
>> gnucash-user mailing list
>> [hidden email]
>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> -----
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
>
>
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.


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Re: Interest / late penalties on invoices

Macho Philipovich-2
Great, thanks! I'll have a look.

On Aug 5, 2017, 6:32 PM, at 6:32 PM, Derek Atkins <[hidden email]> wrote:

>Send them a Customer Report
>That's what it's for.
>
>-derek
>Sent using my mobile device. Please excuse any typos.
>
>
>
>On August 5, 2017 6:03:53 PM Macho Philipovich <[hidden email]>
>wrote:
>
>> Thanks David.
>>
>> Since the goal is to make it as convenient as possible for clients to
>> pay, I'd really like to present them with a simple document that
>clearly
>> indicates the total outstanding amount owing, rather than a series of
>> invoices they have to try to sum up.
>>
>> Perhaps the solution is to send all the invoices with a cover sheet
>> listing the total, but that also seems unnecessarily complicated.
>>
>> If anyone has any further thoughts I'd be happy to hear them.
>>
>> Thanks,
>>
>> Macho
>>
>>
>> On 2017-08-04 09:56 PM, DaveC49 wrote:
>>> Macho,
>>>
>>> From an accounting perspective, the interest charge is not incurred
>until
>>> the original invoice is overdue past the agreed date and should be
>recorded
>>> as such at that time, while the original sale is recorded at the
>date at
>>> which it occurred.
>>>
>>> On this basis, I think it would be most appropriate to issue an
>additional
>>> invoice for the interest charges referencing the original invoice at
>the
>>> date those charges become applicable and then forward a copy of the
>original
>>> invoice along with the invoice for the interest charges to the
>customer. If
>>> the invoice remains outstanding, then you would have to periodically
>e.g
>>> monthly or quarterly send  new invoices for the accruing interest
>charges.
>>>
>>> In mananging this for low value sales, the additional cost of
>issuing and
>>> mailing the additional invoice may outweigh any additional gain from
>the
>>> interest charge, so it may be wise to have a threshold in the sale
>value,
>>> above which you change the terms of sale to include the interest
>charge for
>>> late payment, or more simply, not pursue the interest charges for
>sales
>>> below an appropriate threshold while keeping the provision in the
>terms of
>>> sale.
>>>
>>> You may also need to consider any constraints on policy imposed by
>any
>>> consumer protection legislation which may apply.
>>>
>>> It would be interesting to compare the effectiveness of offering a
>discount
>>> for early payment with the imposition of an penalty interest  (or
>using
>>> both) in encouraging prompt payment of invoices. Carrot or stick cf
>carrrot
>>> then stick?
>>>
>>>
>>> David Cousens
>>>
>>>
>>>
>>> -----
>>> David Cousens
>>> --
>>> View this message in context:
>>>
>http://gnucash.1415818.n4.nabble.com/Interest-late-penalties-on-invoices-tp4693055p4693057.html
>>> Sent from the GnuCash - User mailing list archive at Nabble.com.
>>> _______________________________________________
>>> gnucash-user mailing list
>>> [hidden email]
>>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>>> -----
>>> Please remember to CC this list on all your replies.
>>> You can do this by using Reply-To-List or Reply-All.
>>
>>
>> _______________________________________________
>> gnucash-user mailing list
>> [hidden email]
>> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> -----
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
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